MA Gay divorce and division 401K contributions

[Guest weazzie55]

I am a newly divorced gay female in the Commonwealth of Massachusetts. My ex-wife recently signed a separation agreement for the divison of property and splitting of the 401K at her work. In Massachusetts, her company recognized me as her spouse for 3.5 years. I recieved dental benefits from her through her plan at work and for three years, I contributed to the 401 K account. Her company matches the amount that she adds to the account every payday.

However, now my ex-wife is claiming that according "Goodrich vs. Dept of Health" and in accordance with DOMA, she is not obligated to divide this property as instructed, agreed upon and signed for and by her in the separation agreement. This agreement was certified and put into effect per the judge (happily I might add) the day we did this. Our divorce becomes final 90 days from that day in the dissolution of marriage that will show up at my door.

I did my homework pertaining to this, but I am very confused.

First and foremost, the Goodrich decision on behalf of Massachusetts Appellate court ; pertains to the "recognition of same sex couples and equality along with definition of marriage." So basically I think that she is confused pertaining to this origin of law.

Secondly, "DOMA" pertains to federal benefits such as social security, survivor death benefits under federal guidelines and numerous other things such as rollover for deceased spouse 401K/IRA accounts, burial allowances, and taxable interested on properties. No where does DOMA discuss the division of property or assets with exception of federally recognized heterosexual marriage.

When it comes to Federal taxes, I always file single. I have always filed "married" on my state taxes, but single on my federal taxes because I cannot for tax purposes under the federal government.

She has decided this last season to file "single" on her state taxes when in fact she was married. Is this legal? The IRS (state) also wants to know why she did this on her taxes, and the IRS also wants to know where her added income came from on her financial statement to the divorce court. (she padded it heavily).

I am also a veteran and on disability. As this is a federal benefit for me, she cannot be added to my VA medical coverage, nor can she touch any of my disability that I recieve monthly. I don't touch her federal social security, she doesnt touch my disability. End of story.

If the company matches her 401 contributions and recognized me under state law as a married couple in the Commonwealth with all the same rights and priviledges of marriage, can she deny this agreement that she signed or refuse a judges order on this?

Any help or advise I can get would be greatly appreciated.

Thanks

[J Simmons]

You need to ask the judge (file a written motion with the court) for an implementing order that you'd have drafted and propose that the judge sign (enter). The order would need to meet the requirements of Internal Revenue Code section 414(p) and probably also ERISA section 206(d)(3). This requires specialized legal knowledge. You want to ask your divorce attorney for a "QDRO", that's what these orders are referred to. Once the court issues the order, you present it to the plan administrator of the 401k plan.

Your ex may object to the court, which would then decide whether to enter the order over the objection. The court would be guided by what is in the divorce agreement. Your ex may object to the plan administrator, which would then decide whether the order meets the requirements of Internal Revenue Code section 414(p) (and ERISA section 206(d)(3), applicable to the 401k plan). If the court issues the order and the plan administrator finds that the order is a QDRO, then the plan administrator will separate the 401k benefits and create an account for you, as a 401k beneficiary of that portion.

[K2retire]

Please keep us updated on this. Because retirement accounts are governed by Federal law, which does not recognize gay marriage, many of us are anxious learn the outcome.

[Guest mjb]

Despite what other may believe I dont think that a state court can issue a DRO authorizing the division of benefits in a same sex marriage that would be accepted by a plan because a spouse who qualifies as an alternate payee eligible for a QDRO under IRC 414(p) (8) is required by DOMA to be a member of the opposite sex. (The only other possibility for being an alternate payee is if you would qualify as a dependent).

The requirement for complying with DOMA is important because the transfer of assets under a valid QDRO is an exception to IRC 401(a)(13) which prohibits an assignment or alienation of a participant's benefits. The transfer of plan assets to a party who is not an alternate payee under IRC 414(p)(8) would be an impermissible alienation of plan assets which would jeopardize the plan's qualified status.

In addition, because you are not a spouse under DOMA, your ex will be taxed under federal law on the value of any plan assets that are tranferred to you.

[GBurns]

Does the separation agreement actually says split the 401(k) or does it say split the value or split an amount equal to the value ?

[QDROphile]

mjb is correct. A qualified plan cannot divide the retirement plan benefits and pay to a same sex former spouse (or other relationship, whatever you call it) unless the person is a dependant under federal law. Federal law does not recoginze same sex spouses, and plan qualfication is are governed by federal law. The plan would be disqualified if divided and distributed any benefit.

[Guest Sieve]

On a practical level, if your ex-spouse is 59-1/2 then an in-service distribution (taxable) could be made to her under the plan (if the plan so provides) and she could then comply with the DRO by giving you the funds directly. But, you would not be able to roll that payment over and earn on a tax-defered basis (except to the extent you were eligible for, and made, an IRA contribution with those funds or used the funds and therefore were able to defer salary into your own 401(k)/403(b) plan). QDROphile & mjb are absolutely spot on, and the plan administrator is obligated to refuse to pay under the DRO since it is not a QDRO unless were a dependent.

[Belgarath]

I have a question re your first paragraph.

"I am a newly divorced gay female in the Commonwealth of Massachusetts. My ex-wife recently signed a separation agreement for the divison of property and splitting of the 401K at her work. In Massachusetts, her company recognized me as her spouse for 3.5 years. I recieved dental benefits from her through her plan at work and for three years, I contributed to the 401 K account. Her company matches the amount that she adds to the account every payday."

It seems like you are saying, in the 4th sentence, that YOU contributed to HER 401(k) account. Is that really the case? Presumably her salary was reduced by the contribution amount to the 401(k), and this isn't really what you are saying, or meant to say?

[Guest weazzie55]

Thanks for all the responses.

When in mediation we sat down and went from a divorce A form to B form. She signed and reviewed everything for 8hrs. it went before the judge and was signed.

The 401K is a company matched contribution plan. My ex- can close it at any time, borrow from it, etc.. And yes, I contributed to it for 3.5 years. From our joint account, to her checking account, then used her ADP payroll access to remove money and roll into her 401K at work. When we signed the agreement, she was to have calculated the 401K amount from our date of marriage 1/31/05-7/16/08. I was to have received half the amount acrued for that time. Also, she was to have removed 4800 from this 401K for half the value of the family vehicle.

I cannot develope QRDO, as I don't have the numbers of accrued money for the last 3.5years. She is unwilling to comply with the order and agreement she signed for. When I did a bit of homework online, I also dipped into whether or not her 401K matched contribution plan was regulated by the federal real government, and from what I found it is not? I am not asking her to close it, just borrow from it

DOMA, i found pertains to federal benefits...ie social security, individual fed tax returns, rollover 401K deceased spouse etc. I am not going after this.

I only want back what I contributed the last 3.5 years of marriage, within the company that recognized me as her spouse and gave me benefits.

[Guest weazzie55]

You need to ask the judge (file a written motion with the court) for an implementing order that you'd have drafted and propose that the judge sign (enter). The order would need to meet the requirements of Internal Revenue Code section 414(p) and probably also ERISA section 206(d)(3). This requires specialized legal knowledge. You want to ask your divorce attorney for a "QDRO", that's what these orders are referred to. Once the court issues the order, you present it to the plan administrator of the 401k plan.

Your ex may object to the court, which would then decide whether to enter the order over the objection. The court would be guided by what is in the divorce agreement. Your ex may object to the plan administrator, which would then decide whether the order meets the requirements of Internal Revenue Code section 414(p) (and ERISA section 206(d)(3), applicable to the 401k plan). If the court issues the order and the plan administrator finds that the order is a QDRO, then the plan administrator will separate the 401k benefits and create an account for you, as a 401k beneficiary of that portion.

PLEASE READ THE BOTTOM

[Guest weazzie55]

Does the separation agreement actually says split the 401(k) or does it say split the value or split an amount equal to the value ?

The agreement that she signed states in the pension and retirement benefits section:

I am awarded 50% of the value of the 401K that acrrued during the course of the marriage from 1/31/05- 7/16/08.

My ex- shall also transfer $4062 from her 401K into an account for me as compensation for her half of the family vehicle.

These transfers shall take place on or before september 1, 2008

[J Simmons]

All 401k plans depend on federal tax law for the favorable tax treatment, and DOMA applies to all federal laws. 401k is a reference to a section in the Internal Revenue Code, which is the codification of federal tax statutes enacted by Congress.

Some 'renegade' employers will nevertheless recognize for their 401k plans domestic relations orders for same-gender partners. (I would not advise an employer to do so, but some reportedly have.) So it may be worth a shot in your case.

You should seek competent ERISA counsel to draft an order (putative QDRO) for you to present to the divorce court. Even without the calculation your ex was to do, the order could be drafted with specifics about the time period 1/31/05-7/16/08, and that you are to be awarded that part of the current 401k balance that is due to contributions made during that era.

If the divorce court signs the order, it is presented to the 401k's plan administrator, and the plan administrator 'bites off' on it, then you ought to quickly withdraw the money before the plan administrator perhaps has second thoughts.

Alternatively, you could ask the divorce court to order your ex to pay you a like amount from other resources available to your ex. That way, DOMA would have no impact.

[Guest mjb]

Does the separation agreement actually says split the 401(k) or does it say split the value or split an amount equal to the value ?

The agreement that she signed states in the pension and retirement benefits section:

I am awarded 50% of the value of the 401K that acrrued during the course of the marriage from 1/31/05- 7/16/08.

My ex- shall also transfer $4062 from her 401K into an account for me as compensation for her half of the family vehicle.

These transfers shall take place on or before september 1, 2008

I dont see how any plan administrator would risk a claim by a participant by transferring funds pursuant to a DRO which would not qualfy as a QDRO to a same sex spouse who is not an alternate payee which results in taxation to the employee as an assignment of income. I guess the renegade employers do not care about filing incorrect 1099s listing non spousal payees as the recipients of the transfers under a QDRO. (Since only a spouse who is a member of the opposite sex can be taxed on tranfers under a QDRO).

The question is if the plan authorizes the transfer ofa participant's benefits to a same sex spouse, can the employee recover the amount paid from the plan because the plan administrator authorized the payment in violation of plan terms (since the plan is subject to DOMA). I would not want to be the plan administrator who has to to pay the legal fee needed to answer this question.

[GBurns]

I still cannot see this as a 401(k) or QDRO issue. I do not see it as a plan issue, I see it as a simple breach of the agreement.

The agreement is not asking that the Trustee do anything. All it says is that one person pay the other 50% of the value of what is in the 401(k). The OP says that she was awarded the value, she did not say that she was awarded the 401(k) or assigned access to the 401(k).

[Guest Sieve]

To the extent this is not a QDRO--which it isn't--you're correct, GBurns: one party owes another a certain amount of $$. But, whether the agreement tries to require a transfer directly from the 401(k)--because that may be the only place the money is available--we really don't know, because we don't have the DRO to review. But, if this language indicated above is correct--"ex- shall also transfer $4062 from her 401K into an account"--then it appears to seek a direct transfer from the 401(k).

Since we don't have a QDRO in this isntance, and if there is no money available elsewhere, it appears that the participant spouse must either (i) borrow from the 401(k) and pay over the proper amount, or (ii) take a post-59-1/2 distribution and pay over the $$ (or perhaps take a hardship distribution, if available ujdner the circumstances)

[david rigby]

The 401K is a company matched contribution plan. My ex- can close it at any time, borrow from it, etc.. And yes, I contributed to it for 3.5 years. From our joint account, to her checking account, then used her ADP payroll access to remove money and roll into her 401K at work.

Pardon my ignorance, but I don't know what this means. How can you contribute to her 401(k) account? Is she the employer? Were you an employee of the same company (in which case you should have your own account)?

[J Simmons]

Hey, David,

I've taken it to mean that between the poster and her ex, they had an agreement whereby the ex, as the employee, would put into the 401k plan more out of her paychecks than the ex otherwise would. If that was, say, $350/mo, the poster paid $350 to the ex, all done with the understanding between them that these extra benefits would be the poster's. Nothing that the 401k plan would recognize. These would, from the plan's perspective, be benefits of the employee, the ex.

[Guest weazzie55]

Hey, David,

I've taken it to mean that between the poster and her ex, they had an agreement whereby the ex, as the employee, would put into the 401k plan more out of her paychecks than the ex otherwise would. If that was, say, $350/mo, the poster paid $350 to the ex, all done with the understanding between them that these extra benefits would be the poster's. Nothing that the 401k plan would recognize. These would, from the plan's perspective, be benefits of the employee, the ex.

Nope this wasnt the case at all. she used her payroll ADP icon and removed from her direct deposit an amount that she wanted to put into her employer match contribution plan. She would then remove money from our joint account into her checking account so as to not lose any money from her paycheck. The agreement/order signed in divorce court was that she was to remove $4000 from her 401K and give it to me for 1/2 the family vehicle. She was to have then calculated 50% of the accrued value and deposited it into an account for me. Needless to say, she has refused both of these and is going back to court on contempt MOnday.

[QDROphile]

That should be fun if she is still employed by the same employer, considering that it is likely to be impossible for her to get the money from the 401(k) plan even if she wanted to do so.

[K2retire]

That should be fun if she is still employed by the same employer, considering that it is likely to be impossible for her to get the money from the 401(k) plan even if she wanted to do so.

...unless she no longer works for that employer.

[J Simmons]

... or there are loan provisions.

[QDROphile]

That should be fun if she is still employed by the same employer ... unless she no longer works for that employer.

Hmm. Explain how that could happen. I know that Masschusetts is famous for some of its no-show government jobs. Someone could be employed but not really working, but in the private sector even that arrangement would usually not allow a distribution of elective deferral amounts, nor a distribution of other employer contributons. After-tax employee contributions, anyone?

[Guest Sieve]

Bottom line . . . we could pose possibilities forever, but without the DRO in our hands, we don't know precisely how it is worded--i.e. whether it tries to require a direct transfer from the 401(k) account to another person or to an IRA, or whether it merely contemplates that the 401(k) account is the measure for the precise amount to be paid, or whether it suggests that the 401(k) account is the source of the funds to be used since the other partner was the source of some of the deferals.

Time for a real live attorney to review this one, methinks.

[K2retire]

That should be fun if she is still employed by the same employer ... unless she no longer works for that employer.

Hmm. Explain how that could happen.

Would you believe too many calls from participants demanding their money without regard for whether or not they had a distributable event? Or perhaps posting too late at night?

[QDROphile]

Either is adequate and I could come up with a few more. My downfall is the quick pass by with the obvious solution or observation.